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September 4, 2014, Trial News

Minnesota Supreme Court rejects Twombly and Iqbal pleading standard

Alyssa E. Lambert

The Minnesota Supreme Court has expressly rejected the federal pleading standard that the U.S. Supreme Court established in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal and held that Minnesota’s traditional pleading standard applies.

The Minnesota Supreme Court has expressly rejected the federal pleading standard that the U.S. Supreme Court established in Bell Atlantic Corp. v. Twombly (2007) and Ashcroft v. Iqbal (2009)—which collectively require a claim to be factually plausible to survive a motion to dismiss. It held that Minnesota’s traditional pleading standard applies to all state civil actions. This is the eighth state supreme court to refuse to apply Twombly and Iqbal, and plaintiff attorneys are hopeful this decision will influence other state courts and reduce excessive motion practice at the pleading stage. (Walsh v. U.S. Bank, N.A., 2014 WL 3844201 (Minn. Aug. 6, 2014).)

The decision affirms the Minnesota Appeals Court’s revival of a lawsuit seeking to overturn a home foreclosure that U.S. Bank instituted. The court held that Minn. R. Civ. P. 8.01 allows a claim to survive a motion to dismiss if it’s possible that the plaintiff might produce any evidence to support that claim, and that plausibility is not the dispositive test for dismissal.

In 2011, U.S. Bank commenced a nonjudicial foreclosure proceeding against Laura Walsh after she defaulted on the mortgage for her Minneapolis residential property. The bank attempted to serve the foreclosure documents on “Jane Doe,” an unidentified adult at Walsh’s property, but Doe refused to accept service. The process server left the documents in the door, and the property was sold at foreclosure.

Walsh sued the bank to vacate the sale due to ineffective service under Minnesota law. She claimed the process server attempted to leave the foreclosure documents with Doe, who did not reside at the premises. Only she and her male roommate lived there.

The bank moved to dismiss, arguing that Walsh’s complaint failed to meet the Twombly and Iqbal plausibility standard, under which a complaint must contain “enough facts to state a claim to relief that is plausible on its face,” and mere “labels and conclusions, and a formulaic recitation of the elements of a cause of action” are insufficient. It claimed Walsh’s allegations were “conceivable,” not plausible.

The trial court dismissed the case. The Minnesota Appeals Court reversed based on Rule 8.01: A “pleading which sets forth a claim for relief . . . shall contain a short and plain statement of the claim showing the pleader is entitled to relief.” Under this standard, the appellate court said it was possible the plaintiff could produce evidence to support her claim.

The state supreme court granted review to decide which pleading standard should apply. Concluding that Twombly and Iqbal are instructive for state courts but not binding, the court found no compelling reason to depart from the traditional standard.

Minnesota, a notice-pleading state, “does not require absolute specificity in pleading but rather requires only information sufficient to fairly notify the opposing party of the claim against it,” Judge David Lillehaug wrote for the majority. By contrast, the plausibility standard “raises the bar for claimants . . . and thereby conflicts with Rule 8.01’s preference for non-technical, broad-brush pleadings.”

The court ruled that the plaintiff’s complaint satisfied the traditional standard, because it contained two factual assertions that, when accepted as true, adequately contest personal and substitute service: The documents were not served on either Walsh or her roommate, and they were the only residents of the property at that time.

Judge Lorie Gildea and Judge Christopher Dietzen concurred. They agreed that Walsh’s complaint was sufficient to survive a motion to dismiss but said the majority wrongly delved into deciding whether the plausibility standard should apply to state proceedings.

“I respectfully disagree with the concurrence and agree with the majority—it’s an issue that needed to be resolved and an issue that was appropriately decided,” said Minneapolis attorney Mark Kosieradzki. “Other state courts will continue to face this issue, and I hope they will follow the Minnesota Supreme Court decision. But as long as you have a pleadings question floating around, the trial courts will be burdened with motions.”

Martin Carlson, also of Minneapolis, represented the plaintiff on appeal and said this issue has been coming up routinely on motions to dismiss. “It was unsettled in Minnesota, and plaintiff attorneys have been getting fairly tired of having to make those arguments. The issue is now conclusively resolved,” he said.

Seven other state supreme courts—Arizona, Delaware, Iowa, Tennessee, Vermont, Washington, and West Virginia—have explicitly or implicitly rejected Twombly and Iqbal. Only Massachusetts, Nebraska, South Dakota, and Washington, D.C., have adopted the plausibility standard. “The balance is officially shifting, which is good,” said Carlson.

“I view the Twombly/Iqbal standard as a vehicle for obstruction to access to the courts,” Kosieradzki said. “Let the parties resolve the case on its merits, rather than it being about who can write the best complaint and the best answer.”

The major issue with Twombly and Iqbal is the extreme burden they place on plaintiffs who litigate against large corporations, Carlson explained. “The parties are expending significant resources at the outset of the case, and based on the imbalance between the parties, this cannot produce a just result,” he said.

The case has been remanded. U.S. Bank will be compelled to file an answer and proceed with discovery.